Qualcomm Buy Back Raises Price Target To $77

QUALCOMM, Inc. (NASDAQ:QCOM) is buying back stock. The buyback has long been rumoured to pick up in size, and analysts at BMO capital markets think that the move is an extremely positive one for the chip maker. A new report from lead analyst Tim Long boosts the 2014 EPS estimate for the company as well as the company’s price target.

In the report, entitled ‘It’s for Real; Big Buyback Leads to Higher Estimates; Maintain Outperform’, the analysts raise 2014 EPS estimates by 14 cents, and bump the price target on QUALCOMM, Inc. (NASDAQ:QCOM) shares from $75 up to $77.

Qualcomm buyback

Qualcomm announced earlier that it had bought $3.2 billion worth of its own stock so far this quarter. The analysts at BMO reckon this means around 48 million shares have been bought. The $3.2 billion buyback makes the $1 billion total buy in the quarter ending June 30 seem tiny.

The most important part of this morning’s announcement was probably the news that QUALCOMM, Inc. (NASDAQ:QCOM) has extended the buyback program. The company announced that it was going to buy around $5 billion more of its own stock.

According to the report, the company will be able to buy about $1 billion of its own stock every quarter going forward. That means that the current program will be finished by the end of the 2014 fiscal year. Qualcomm can also afford to raise its dividend, according to the analysis.

Qualcomm performance

QUALCOMM, Inc. (NASDAQ:QCOM) is cash heavy, and that’s very good for investors. The company should still have around $5 billion cash on hand at the end of 2014, according to the BMO report. That leaves the company in a very good position for next year.

The analysts estimate that QUALCOMM, Inc. (NASDAQ:QCOM) will earn $5.12 in 2014, as opposed to $5 in its previous valuation. The rise in 2014 pro forma earnings is, unfortunately, not mirrored in the expected results from fiscal 2013. BMO Capital Markets expects QUALCOMM, Inc. (NASDAQ:QCOM) to earn $4.56 for the current year, a one cent increase from the $4.55 the company had previously projected.

QUALCOMM, Inc. (NASDAQ:QCOM) shares have been performing relatively poorly so far in 2013. The firm’s shares are up barely over 12 percent for the period, just over half of the gains in the wider Nasdaq. The capital return program is a positive catalyst for shares, however, and it should impact shares going forward.